Economy

The Fed announced Wednesday that it would purchase $600 billion in Treasurys, aiming to lower long-term interest rates in an effort to spur spending and ultimately lower the U.S. unemployment rate, currently at 9.6 percent. The move comes on the heels of previous purchases of $1.7 trillion in mortgage and Treasury bonds.

The Pending Home Sales Index,* a forward-looking indicator, slipped 1.8 percent to 80.9 based on contracts signed in September from an upwardly revised 82.4 in August. ... The data reflects contracts and not closings, which normally occur with a lag time of one or two months.

Today the Fed is scared to death that the boys and girls and robots on Wall Street are going to have a hissy fit. And therefore these programs, one after another, are simply designed to somehow pacify the stock market, and hoping to keep the stock indexes going up, and that somehow that will fool the people into thinking they are wealthier and they will spend money

Many of us know the proponents of hyperinflation; Marc Faber, Gonzalo Lira, the National Inflation Association, and maybe even Peter Schiff falls into this category. When we look to countries that have experienced hyperinflation in modern times we can see direct parallels between their monetary policies and that of the US's in the past few years and we can draw a quick conclusion that we will experience hyperinflation as well.

In this interview with Erik Townsend, entrepreneur and private investor, Erik argues that this conclusion is too simplistic and does not take into account the 'Five Fundamental' differences between the US Dollar and those currencies mentioned as examples of hyperinflation.

Energy

President Obama's top advisers recommended cutting off funding for a federal loan-guarantee program meant to spur the construction of wind and solar farms and other alternative energy projects, saying taxpayer dollars might be better spent elsewhere.

But the advisers, including Mr. Obama's outgoing National Economic Council Director Lawrence Summers, energy policy czar Carol Browner and Ron Klain, chief of staff to Vice President Joe Biden, warned Mr. Obama that pulling money from the program would risk antagonizing powerful allies in Congress, and would "signal the failure of a Recovery Act program that has been featured prominently by the administration," according to an Oct. 25 memorandum viewed by The Wall Street Journal.

German solar PV in 2009 produced only 1.1% of total German electricity, but issues of grid stability are already being raised, as is the issue of excessive cost. Through the FIT, the electrical system paid an average $0.54 cents per kilowatt hour for the electrical power for the electricity it purchased.

The cost of wholesale power has varied over the years, but has been much lower than this. In 2009, the cost of wholesale electricity averaged $0.075 at peak rates, or $0.058 at base load rates. Even this cost comparison may give too much credit to solar. The only real savings from having the PV systems is the savings in fuel, since the generating units used for peaking would still need to be in place, and employees would still be needed to operate and maintain them. The cost of fuel would have been even lower than base load rates.

Article suggestions for the Daily Digest can be sent to [email protected]. All suggestions are filtered by the Daily Digest team and preference is given to those that are in alignment with the message of the Crash Course and the "3 Es."

From Bank of America's just-released 10-Q (via Keith McCullough), here's what the company says about repurchase lawsuits: The Corporation and affiliates, legacy Countrywide entities and affiliates, and legacy Merrill Lynch entities and affiliates have been named as defendants in a number of cases relating to various roles they played in MBS offerings. These cases are generally purported class action suits or actions by individual purchasers of securities. Although the allegations vary by lawsuit, these cases generally allege that the offering documents for more than $375 billion of securities issued by hundreds of securitization trusts contained material misrepresentations and omissions, including statements regarding the underwriting standards pursuant to which the underlying mortgage loans were issued, the ratings given to the tranches by rating agencies, and the appraisal standards that were used in violation of Section 11 and 12 of the Securities Act of 1933 and/or state securities laws. The cases generally allege unspecified compensatory damages and in some instances, seek rescission. The Corporation has previously disclosed some of these matters under other headings, in its 2009 Annual Report on Form 10-K and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2010 and June 30, 2010,

I have a question for Erik T. So Helicopter Ben is devaluing the dollar, right ? Now pretty much everyone else is devaluing their currency. What happens if several countries devalue so much to try and match the dollar, they inadvertantly send their currency into Hyperinflation,,,, what happens if 15, 30, or even 50 countries miscalculate their own devaluation ? I don't know the probability of that happening, I think it could be an interesting scenerio though...

Ok its way late and I have no adult supervision but I’m posting this anyway.

My analogy of Erik Townsends Argument against Hyperinflation

We are on the titanic captain Bernanke at the helm. We just hit an iceberg. Marc Faber, Gonzalo Lira, the National Inflation Association, and maybe even Peter Schiff are telling people to get into the life boats because other boats have sunk after hitting icebergs.

Erik Townsend on the other hand argues their point of view is too simplistic because this boat is different than those other boats. It is made different from those other boats. It has never sunk before. (however not that it is unsinkable) We need to have a thorough discussion about the things that would actually sink the Titanic. Like hitting an iceberg or taking on excessive water. Also, discuss the signs in painstaking detail of things to look for that would tell us that the Titanic is actually sinking. But when will that be? He doesn’t know because he can’t predict the future. Will it be when his feet get wet? When the water is up to his waist?

Sorry Erik I’m on the lifeboat with the other “simplistic” thinkers. If the Titanic doesn’t sink I can get back on it.

"The idea that higher inflation might help isn't outlandish; it has been raised by many economists, some regional Fed presidents and the International Monetary Fund. But in the same remarks in which he defended his new policy, Bernanke — clearly trying to appease the inflationistas — vowed not to change the Fed's price target: "I have rejected any notion that we are going to try to raise inflation to a super-normal level in order to have effects on the economy."

And there goes the best hope that the Fed's plan might actually work."